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External third-party administrators (TPAs) will continue to serve state-owned general insurers for the foreseeable future.

“While the Health Insurance TPA of India has been set up exclusively to manage health claims of public general insurers, the entire TPA business will not be transferred to them. We will begin by 45-50 per cent business from the in-house TPA and rest will be from external TPAs,” said a senior official from a state-owned general insurer.

Health Insurance TPA of India is expected to begin doing business by April 1, 2014. Improvement in customer service and increasing the efficiency in claims processing is its aim.

This common TPA to process health claims has National Insurance Company, New India Assurance Company, United Insurance Company, Oriental Insurance Company and General Insurance Corporation of India as stakeholders. The first four have 23.75 per cent stake each and GIC has five per cent.

This TPA will look into health claims and handle a majority of the claims received by these general insurers. The common TPA has been proposed to prohibit large-scale leakages, while settling insurance claims in the health segment. Further, it is intended to process claims of public general insurers in-house, rather than handling by an external agency.

Though initially it was said the in-house TPA would handle all claims, it is now envisaged that only 70-75 per cent of the total business would be shifted.

Other TPAs also believe their business won’t be drastically affected. “While some shifts in business will happen, we don’t see the in-house TPA as a threat. In fact, it will complement our services,” said the chief executive of a large external TPA that caters to the government-owned insurance companies.

The common TPA is expected to reduce costs for these companies, which pay a commission of approximately six per cent of premiums to TPAs for settling claims. Currently, most claims in the health segment are handled by external players, which has increased the time taken to settle claims.

“During the initial period of setting up of operations, we intend to take assistance from consultants to build a world-class organisation, with robust information technology systems, bringing in some of the best practices from developed markets,” P K Bhagat, managing director of the Health Insurance TPA of India, had told Business Standard earlier.

After the in-house TPA begins business operations, the claims handling and processing from external agencies will gradually be transferred to the new entity. The entity has been formed with an authorised capital of Rs 300 crore and paid-up capital of Rs 10 crore.